With more digitalization journey around the world and major shift towards E-Commerce business has brought up a major shift towards Credit Card Demand among Canadians. So, it becomes very important for us to maintain a good Credit score to get most premium advantage of Credit Cards like Add-On Cards, Higher Credit Card Limit, Pre-Approved and Cheaper Loans, Other Benefits and Rewards. Good Credit Score has become an essential Indicator of good financial health. It basically let the lender know how responsibly we as an individual using our credit limit.
Why Do Canadians need a Good Credit Score?
An excellent Credit score can save thousands of Canadian dollars for a Canadian over the course of their life. As they will get better rates on auto loans, mortgages, and everything related to finance. Individuals are considered as lower-risk borrowers having good Credit score. So, more banks compete for their business and offer better rates and negligible processing fees to such Individuals. On the other hand, individuals having poor credit score are considered as a higher-risk borrowers and they don’t get any such financial advantage. In some case poor credit score can also have an adverse effect on your insurance score.
In Canada average credit score ranges from 400 to 900. Anything within the 750-900 range is considered “excellent,” while scores between 660-760 are good. In Canada we have mainly two credit bureaus- Equifax and Transunion where we can check our credit score.
So, if you want to boost your Credit Score in few months there are number of quick and simple things which you can adopt. Reflection in good credit score may take few months but you can start working on it right now.
Tips to Improve Credit Score
Focus on Timely Payments-
Payment punctuality is the most important factor which effects your Credit score. So, to maintain good credit score just make timely payments to your Credit card bills. It is important for the beginners also who has just started and don’t have any Credit score yet as it will help them to start with a right path towards a good score. Any late payments can severely dent on you Credit score. In worst case if you are not able to make the full payment then at least pay the minimum payment due. Even if you think some credit bill is in dispute don’t skip payment for that.
Less Utilization of Credit Limit–
It is always recommended that you should not utilize your full credit limit. Ideally you should not use more than 35 % of your Credit limit. You can postpone your big purchases to next billing cycle once you have cleared your older dues. If you use a lot of your available credit limit, lenders see you as a Potential risk even if you pay your full bill before due date.
Don’t Close Old Accounts-
Credit Card holder should never close the oldest account as it will impact negatively on your Credit Card Utilization ratio. On other side its recommended that even if it’s not required then also you should keep your oldest card active by having small purchase in some regular intervals of 6 months to 1 year. Longer your credit history, higher the chances of improved Credit score.
Effectively deal with Collection Accounts-
If you have not paid your debt timely and that has been sent for collections it will also hurt your credit score, even if you pay them lately. In such situation Try to negotiate with the collection agency and agree them to mark the account as “paid as agreed” in written or remove the notation from your credit report history immediately.
It may not impact your Credit score directly but believe me it does impact your financial stability and once your financially stability is unbalanced it impact your actions like Unnecessary buying, new loans etc which will impact your Credit Score. To avoid such situation, you can use various Budget templates which will help you in better financial planning like how much you need for essential expenses, debt repayment, and other miscellaneous expenditure.
Frequent review of your Credit Score-
Be proactive and don’t assume anything. A negative entry in your credit report or decline in Credit score its not always your mistake. Many such instances occurs due to errors in Credit report or some type of typo mistake which can cause a dip in FICO score. So, it’s highly advised to review your official records from Equifax and TransUnion- two major credit reporting agencies.
Only take out credit for what need–
In a world full of flashy loan offerings and rewards Credit cards it’s easy for Canadians to get distracted and take out much more credit than they need. Applying for new credit cards and loans will cause the Credit score to drop by a few points, especially if you routinely apply for new offers. So, apply only when it’s really required. It has been observed that the People who take lots of lines of credit also close these accounts very frequently. Frequent closing of credit accounts negatively impacts your credit score as it affects the average age of your credit accounts.
So, if you are looking to improve your Credit Score just maintain the right mindset and keep above points on your fingertips. Always Remember that your credit score takes time to build, so don’t expect changes overnight but definitely you are on right track and have a good score in few months.